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Caltex share price falls as profit forecast springs a leak

Nicole Stevens

CALTEX Australia has forecast a sharp fall in first-half profit because of the strong dollar, high oil prices and refinery outages, sending its share price down by almost 7 per cent to a 10-month low.

The oil refiner and marketer was the worst performer among the S&P ASX top 100 companies yesterday, closing down 78 cents or 6.85 per cent at $10.60 - its weakest finish since last August.

Caltex blamed challenging external conditions and operating disruptions for lower than expected first-half production volumes and said it expected a net profit of between $110 million and $115 million compared with the $163 million posted in the first half of calendar 2010.

The figures are calculated on Caltex's replacement cost of sales operating profit.

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The company said refining capacity was affected by extended planned maintenance at its Kurnell plant in Sydney, as well as crude berth closures due to bad weather in June.

At the company's Lytton refinery in Brisbane, weather-related outages in January and May cost up to $10 million in net profit.

City Index Australia chief market analyst Peter Esho said Caltex was the latest among a list of industrial companies to cut earnings expectations.

''These guys have continued to disappoint,'' he said. ''They are working hard to reconfigure their business and strip out any unnecessary costs, but that margin continues to be under pressure and there is not a lot of clarity there.

''The market knows that Caltex has these execution issues, so it is not a huge revelation that they have another poor update.''

Caltex said its three-year refining improvement initiative, started in 2010, was beginning to deliver savings. ''Further initiatives, aimed at improving production efficiency and reliability, will be completed during the second half of 2011,'' the company said.

Caltex said refiner margins remained uncertain due to the high dollar.

Caltex's refiner margin, or CRM, a complex measure of the difference between the price of crude oil and the cost of the refined product in Singapore, contracted by 32 per cent and eroded earnings between May 2010 and May 2011.

Caltex forecast an increase in net debt to $700 million at June 30, 2011, compared with $576 million at June 30, 2010.